Yep, the prices are going mad in the UK. The UK inflation report, probably the biggest forex event today, was just released and it was… the best report since the start of the global financial crisis in 2008, or the worst – depending on how you choose to see it.
If you simply compare the numbers, this report´s numbers reported a huge jump for just a month's time. Where to begin?
The headline CPI (consumer price index) number jumped from 1.9% to 2.3%. The expectations were around 2.2%, so this beat even the most optimistic forecasts.
Retail price index (RPI) jumped even more, from 2.6% to 3.2%. HICP increased to 3.2% and so on. Only the producer price index (PPI) didn't quite meet expectations, though a 6.2% year/year increase in house prices is still a lot.
?The inflation uptrend is steep
The Pound jumped around 100 pips immediately after the release, but has now stalled. As I mentioned in the previous update, this report looks great coming from a decade of low inflation (and often deflation), but things are not as they used to be now that Brexit is coming for real.
With the pace UK inflation has been picking up in the last few months, the Bank of England (BOE) will be forced to hike interest rates. The problem being that they don´t want to hike the rates because the economy is falling even though Brexit hasn´t oficially started yet, which will obviously make things harder for UK business.
By the way, this jump in GBP pairs has taken them to some interesting levels, which offer some good risk/reward ratio. Let´s bear that in mind.